With the Federal Reserve creating money out of thin air at will, the distinction between money and real savings can is often muddied in the minds of mainstream economists and investors. In this article we attempt to explain the concept of economy-wide savings rates and how the Fed and Treasury's stimulus measures are undermining the U.S. economy's already-low real savings rate to the detriment of future growth.
First we need to define the terms…
Saving: All production that is not consumed.
Investment: All goods produced for the purpose of producing other goods and services.
Depreciation: